Staking is often presented as a simple way to “earn yield” on crypto-assets. In reality, it is one of the core infrastructures of proof-of-stake (PoS) blockchains — and one of the least clearly understood from a legal and regulatory perspective.
While the term “staking” is widely used, it frequently refers to arrangements that differ significantly in function, risk allocation, and regulatory relevance. A clearer taxonomy is therefore essential, especially as staking services become increasingly institutionalized and attract supervisory attention under EU crypto regulation.
What Staking Actually Is (at Protocol Level) At its core, staking means putting “skin in the game.”
In proof-of-stake systems, participants immobilize crypto-assets within a validator node to participate in transaction validation. The incentive structure rests on three pillars:
Rewards, typically newly minted tokens or a share of transaction fees; Sanctions, especially slashing, meaning the forfeiture of staked assets in case of misconduct; Time, as assets must remain locked during a predefined bonding period. Slashing is particularly important. It transforms misconduct into a financially irrational strategy. In this sense, staking functions as a mechanism of private enforcement in systems where traditional legal enforcement is structurally difficult.
A Functional Taxonomy of Staking Services From a legal standpoint, the crucial question is not whether staking exists, but who performs validation and who controls the assets.
Three main models can be distinguished:
1. Solo staking The holder runs their own validator node and stakes their own assets. No intermediation is involved. Risk is primarily technical and protocol-based.
2. Delegated non-custodial staking The holder delegates validation rights to a third-party operator but retains control of private keys. The intermediary lowers technical barriers but does not hold the assets.
3. Custodial staking The intermediary both validates and holds the client’s assets. This represents a structural shift. Custody alters the risk profile and often becomes the regulatory pivot under EU frameworks such as MiCAR.
The distinction is not merely technical. It determines counterparty exposure, risk allocation, and regulatory qualification.
The paper also distinguishes proper staking from what may be described as “staking-in-name-only” structures, where tokens are locked to earn additional tokens but no validation activity is performed. These arrangements differ fundamentally from consensus-supporting staking.
The Risk Stack: From Information Asymmetry to Systemic Concentration Staking services generate layered risks. At the individual level, information asymmetry is central. Even in solo staking, the complexity of protocol rules and governance structures may be opaque. Intermediaries reduce operational barriers but introduce moral hazard and counterparty risk.
In custodial staking, exposure is particularly acute. The client relinquishes control and becomes dependent on the intermediary’s solvency, reliability, and integrity.
At the ecosystem level, concentration risk becomes critical. As staking services scale, a small number of operators may dominate validation. This can undermine decentralization and increase vulnerability to capture, collusion, or correlated failures.
The distribution of governance power over staked assets is therefore not only a technical matter — it is a structural regulatory concern.
Regulation: When Does Staking Become a Regulated Service? Staking, in its pure form, is a technical activity. But regulation does not focus solely on technical functions — it focuses on risk transformation and promises.
Under MiCAR, staking does not have a dedicated regulatory category. Solo staking and delegated non-custodial staking generally fall outside the perimeter of regulated services.
However, once custody is introduced, the analysis changes. If an intermediary controls private keys and administers users’ crypto-assets, authorization as a crypto-asset custody and administration provider becomes necessary.
Moreover, regulatory scrutiny intensifies when providers make promises that alter the client’s risk profile — for example, guaranteed yields, slashing indemnification, or liquidity commitments that go beyond protocol-native rewards.
In these cases, what appears as a technological service may start to resemble financial intermediation.
Liquid Staking and Structural Evolution Liquid staking represents a further step in this evolution. The user receives a transferable token representing the staked position and accrued rewards. This increases liquidity and capital efficiency, but it introduces additional market, governance, and smart-contract risks.
The legal characterization of these liquid staking tokens remains one of the most significant open questions in EU crypto regulation.
Outlook: Institutionalization and Legal Clarification As staking increasingly attracts institutional capital and retail participation seeking perceived “stable returns,” regulatory attention will intensify.
Two issues stand out for future legal research:
The private-law characterization of the user–provider relationship (service, mandate, custody-type construct), distinct from an “investment” relationship; The consumer-protection dimension of retail-facing staking services, including disclosure obligations and the enforceability of contractual risk allocations. More broadly, staking illustrates a recurring challenge of EU crypto regulation: applying frameworks designed for person-based intermediaries to technologically mediated infrastructures.
Understanding staking requires more than technical literacy. It requires a functional legal taxonomy capable of distinguishing infrastructure participation from risk-transforming intermediation.
Further academic reading A more detailed analysis is available in my paper “Staking Services: Taxonomy, Risks and Regulation” (SSRN link).